Is Universal Life Insurance Right For You?
Are you considering investing in universal life insurance? There are some benefits as well as down sides to universal life insurance you should be aware of before purchasing any policies.
There are basically two categories of life insurance: Term Life Insurance
and cash value life insurance, like Whole Life Insurance
and universal life insurance. Term life insurance is the more affordable life insurance. Generally, the premiums for term life insurance are cheaper and make this more affordable life insurance. However, if you are looking for more options and more flexibility, then whole life insurance or universal life insurance is a better choice.
Universal life insurance, like all life insurance, pays out a death benefit to beneficiaries in the event of death. However, what makes this life insurance unique is that it incorporates a savings option into the plan. Universal life insurance acts like a combination of term life insurance and a tax-deferred, interest accumulating savings account.
There are many benefits to universal life insurance. First, the savings portion of the plan is an obvious benefit. Also, because of this savings portion, you may not have to pay premiums throughout the policy. If the amount in the tax-deferred savings portion of the life insurance is enough to cover the death benefit, then you may not have to make payments to keep the policy active.
Another benefit of universal life insurance is the flexibility it offers. With universal life insurance, you can vary the premium amount by using the earnings in the savings portion to pay part or your entire premium. You can also vary the amount of the death benefit with universal life insurance. However, you do pay higher administrative fees for this flexibility.
There are also drawbacks to consider with universal life insurance. Unless you need life insurance into your 70s, then the savings portion is unlikely to accumulate into a worthwhile investment. Since most people do not need life insurance that late in life, it is more beneficial to buy term life insurance and invest in a higher earning retirement account than to purchase universal life insurance.
Also, universal life insurance requires more planning than other types of life insurance. A universal policy must be in effect for at least 15 years to get any return on it.
Carefully weigh the benefits and drawbacks of universal life insurance, as well as other types of life insurance, before purchasing any plans.
